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Premium subsidies and crop insurance demand in Brazil

Premium subsidies and crop insurance demand in Brazil The purpose of this paper is to examine the effects of premium subsidies provided by the Brazilian government through the Rural Insurance Premium Subvention Program (PSR) on the quantity demanded for crop insurance by grains producers of southern Brazil.Design/methodology/approachA fixed effects model was applied to an unbalanced panel data of municipalities of southern Brazil considering the years between 2006 and 2015. Three measures of crop insurance demand were considered: level of total premiums, level of total premiums per hectare and level of total liability per hectare.FindingsResults were in line with previous literature, suggesting the existence of a positive, although inelastic, effect of the subsidy level on the demand for crop insurance. However, unitary elasticity estimates were found for all grains when considered total premiums per hectare as crop insurance demand measure.Originality/valueThe investigation focuses on a crop insurance program conducted in a tropical developing country – a completely different background than previously analyzed in literature. In addition, Brazilian government considers the PSR as one of its most important agricultural programs and this paper is pioneer in empirically explain the huge public investments made to the PSR through the estimation of the effects of premium subsidies on the quantity demanded for crop insurance in Brazil. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Agricultural Finance Review Emerald Publishing

Premium subsidies and crop insurance demand in Brazil

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0002-1466
DOI
10.1108/afr-10-2018-0082
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to examine the effects of premium subsidies provided by the Brazilian government through the Rural Insurance Premium Subvention Program (PSR) on the quantity demanded for crop insurance by grains producers of southern Brazil.Design/methodology/approachA fixed effects model was applied to an unbalanced panel data of municipalities of southern Brazil considering the years between 2006 and 2015. Three measures of crop insurance demand were considered: level of total premiums, level of total premiums per hectare and level of total liability per hectare.FindingsResults were in line with previous literature, suggesting the existence of a positive, although inelastic, effect of the subsidy level on the demand for crop insurance. However, unitary elasticity estimates were found for all grains when considered total premiums per hectare as crop insurance demand measure.Originality/valueThe investigation focuses on a crop insurance program conducted in a tropical developing country – a completely different background than previously analyzed in literature. In addition, Brazilian government considers the PSR as one of its most important agricultural programs and this paper is pioneer in empirically explain the huge public investments made to the PSR through the estimation of the effects of premium subsidies on the quantity demanded for crop insurance in Brazil.

Journal

Agricultural Finance ReviewEmerald Publishing

Published: Jan 7, 2020

Keywords: Brazil; Demand; Crop insurance; Grains; Premium subsidies

References